Building, Growing and Running Artisan Business Part 6
Setting Pricing and Business Profitability
Pricing is one of the most challenging aspects of running an artisan business. Charge too much, and you scare away customers. Charge too little, and you go bankrupt. In this guide, we explore how to price your services for value, sustainability, and long-term profitability.
Pricing Based on Value — The Tale of Two Mechanics
There are two mechanics in Lagos.
Charges ₦10,000 for a standard repair. He uses a fixed fee that everyone pays. He gets some customers, but many say that he is expensive.
Charges based on the value of the repair. He tells customers: "This repair will solve your problem. Your car will be reliable. You won't have to worry about breaking down on the expressway." He charges a fair price for the peace of mind he provides.
Mechanic B gets more customers. His customers are happier. They see the value.
Price based on the value you provide, not the cost of your time.
Pricing for Sustainability — The Hidden Costs
Many artisans under-price their services because they are afraid of losing customers.
This is a fast route to bankruptcy.
Calculate your true costs:
- Materials
- Rent
- Staff salaries
- Utilities
- Equipment maintenance
- Marketing
- Taxes
- Your profit
- Contingency (for unexpected costs)
Let me tell you about Tayo.
Tayo is a carpenter. He charged ₦50,000 for a standard wardrobe. He thought he was making a good profit.
Then he calculated his true costs: materials, transportation, staff salaries, rent, utilities, equipment maintenance, taxes. He was actually losing money on every wardrobe.
He raised his prices to ₦80,000. He lost a few customers. But the customers who stayed generated enough profit to sustain the business.
Premium vs Low-Cost Models
Both premium and low-cost models can work.
- The premium model requires superior quality and service.
- The low-cost model requires superior efficiency and volume.
- Your skills
- Your market
- Your competition
- Your goals
When to Raise Prices
Raise prices when:
- Your costs have increased
- You have added significant value
- Demand exceeds your capacity
- Your competitors have raised prices
- You have not raised prices in over a year
If you haven't raised your prices in over a year, you are losing money to inflation. A small, regular price increase is better than a large, sudden one.
When to Offer Discounts — The Strategic Discount
Discounts are a tool, not a strategy. Do not use discounts as a substitute for value or quality.
Use discounts to:
- Attract new customers (strategically)
- Fill empty time slots
- Reward loyal customers
- Generate cash flow in emergencies
Discounts can train customers to wait for sales. Use them sparingly and strategically. When you do offer a discount, make it time-bound and clearly communicated.
Putting It All Together: Profitable Pricing
Setting the right price for your services is a balance of art and science. It requires understanding your value, knowing your costs, and being strategic about your position in the market.
The stories of Mechanic A and B, Tayo the carpenter, and the premium vs low-cost models all point to one truth: pricing is not about being the cheapest—it's about being fairly compensated for the value you deliver.
To price profitably, remember to:
- Price based on value — not just the cost of your time
- Know your true costs — including hidden expenses
- Choose your model — premium or low-cost, and commit to it
- Raise prices strategically — when costs increase or value increases
- Use discounts sparingly — as a tool, not a strategy
🚀 The Bottom Line
Your price is a reflection of your value. Charge too little, and you signal low quality. Charge too much without delivering value, and you lose customers. But when you deliver exceptional value and price it fairly, you build a business that is both profitable and sustainable.
Know your worth. Communicate your value. Price for profit.
Review your pricing today. Are you charging what you're truly worth? If not, it's time to make a change.